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EU ties pay off, as EIF puts $74M into Dawn Capital’s $232M fund

U.K. VCs were sent a message today by the EU: Continue to invest in European companies and we’ll invest in you. That at least seems to be the takeaway from the news that Dawn Capital, which has built up a reputation as an investor in early-stage SaaS and fintech businesses in the U.K. and Europe, has closed its third fund, Dawn III, at $232 million (£165 million), with the help of the European Investment Fund (EIF).

The EIF is committing £52 million after it previously said it would no longer invest in U.K. venture capital due to Brexit. But it’s clear the strong European ties helped Dawn. It has a 50/50 split of U.K. and European companies in its portfolio.

Claiming to now be the largest European VC fund focused entirely on B2B tech businesses (Notion Capital might contest that), Dawn says the fundraising was heavily over-subscribed despite the hard cap being twice increased. This, the firm said, was down to growing interest amongst investors in the European market, and Dawn’s track record.

That record included some of Europe’s fastest growing B2B software businesses, including Mimecast (currently valued at more than US$2 billion), iZettle, Collibra, Gelato Group, Sonovate, Neo Technology and Showpad.

On the back of these investments, Dawn Fund I has delivered exits such as Mimecast, Sticky, Ecommera and Bityota to name a few. It has also backed iZettle, which now dominates Europe’s SME retail sector.

As well as the European Investment Fund, Fund III investors included the British Business Bank — which is investing in Dawn III through its commercial arm, British Business Investments — alongside new institutional and strategic investors from the U.S. and Europe.

In an interview with TechCrunch, Haakon Overli, general partner at Dawn, said the EIF’s involvement was “because we are investing across Europe.”

He also noted that “really clever U.S. investors are now very well-informed about Europe as they are seeing big companies come out of here. The bigger investors can’t get into the likes of Sequoia, so they see a similar opportunity as when funds moved out from the West U.S. coast to the East.”

He said existing investors had subscribed for nearly 80 percent of Dawn III, “which is nearly three times the size of Dawn II. We are also looking forward to working with our new LPs that will offer strategic benefits, including financial services expertise and closer links to the U.S. market.”

He added that the European tech investment market “has matured so quickly that to keep leading rounds in some of the world’s most exciting businesses has required a commensurate step up in our ability to write larger checks whilst still being confident of continuing to deliver strong returns to our LPs.”

Norman Fiore, general partner at Dawn, said in a statement that “today’s start-ups are eyeing first generation SaaS players as the new targets.” Josh Bell, general partner at Dawn, said “an easing of the financial regulatory environment” in the U.S. will mean “nimble home-grown players taking advantage of this disruption to build European champions.”

Asked if Dawn is seeing new trends in European investing, such as Blockchain, Overli said: “We invest in startups that are solving problems. So if they use blockchain, fine. But we haven’t found one yet. The main thing is that Europe has lots of excellent engineers in companies which are doing great stuff, and the best of those companies are doing very well in the U.S. on the back of really excellent engineering from Europe.”


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